NG PO YU AND ANOTHER v. LAM KAI ON, the executor of the estate of WONG MUI, deceased

CACV 379/2018

[2021] HKCA 263

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 379 OF 2018

(ON APPEAL FROM HCA NO 77 OF 2014)

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JUDGMENT

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Hon Kwan VP:

1.  I agree with the judgment of Chu JA.

Hon Chu JA:

A.      Introduction

2.  This is the appeal of the defendant against the judgment[1] of Au-Yeung J (“the Judge”) given on 13 July 2018. 

3.  The action below concerns the beneficial interests in a property known as House no. 78, 1^st Street, Section D, Fairview Park, Yuen Long, New Territories (“the Property”) registered in the sole name of Madam Wong Mui, deceased. 

4.  By the judgment, the Judge rejected the plaintiffs’ claim that they were beneficially interested in the Property.  The Judge granted a declaration that the Property had been solely owned by the deceased, but ordered her estate to reimburse the 1^st plaintiff ¾ of the mortgage repayments made by her between 1 August 2000 and 1 March 2018 in the sum of $3,199,570.55 and ¾ of mortgage repayments she made on or after 2 March 2018 until the deceased’s estate takes over the repayment.  The Judge further ordered that the judgment sums shall stand charged on the Property until full payment has been made.   

5.  This appeal only relates to the order of payment to the 1^st plaintiff and the order charging the judgment sums on the Property.  It does not involve the 2^nd plaintiff.

B.      The facts

6.  The relevant facts that are not in dispute or found by the Judge are summarised below.

7.  The 1^st plaintiff (“Daughter”) is the daughter of Wong Mui (“Mother”) and Ng Chi Keung (“Father”).  By her previous marriage, Mother had four children.  One of them, who is a daughter, predeceased her. The defendant is one of the three surviving sons. 

8.  Mother died on 15 May 2012.  By her last will dated 15 May 1992, the defendant was appointed the executor of her estate.  

9.  Father became mentally incapacitated shortly after the commencement of the action below.  He died before the trial.  Daughter was substituted as the 2^nd plaintiff in her capacity as the executrix of Father’s estate.

10.  Since the 1960s, Mother and Father had been in merchandise and fabric business.  In 1982, they set up Shun Lee Trading Co (“Shun Lee Trading”) in which they held equal shares.  On 24 September 1996, Shun Lee Trading (Holdings) Limited (“Shun Lee Holdings”) was incorporated to do export trade, with the shares being held by Father (51%), Mother (45%) and Daughter (4%). 

11.  The Judge found that in 1996, Daughter left her job to assist her parents in the business of Shun Lee Trading and Shun Lee Holdings (collectively “Shun Lee Business”).[2] 

12.  Shun Lee Business had since 1997/98 been trading at a loss.  They were eventually closed down in 2005.  Mother had a stroke in 2000 and ceased participating in the operation of Shun Lee Business.  Daughter was the main person running Shun Lee Business until they closed down.

13.  On 25 March 2000, Daughter set up a curtain retail business called Bo Bo Deco, which was a partnership with Father.

14.  Over the years, Mother and Father had purchased six residential properties and one shop as follows:

(1)     A property in SW Building purchased in 1976 in Mother’s sole name, which was rented out until it was sold in 1988.

(2)     A property in Ample Building purchased in 1980 in Father’s sole name, which was used as the family residence until the family moved to the Beacon Heights property (see (3) below). The property was sold in 1987.

(3)     A property in Beacon Heights purchased in 1987 (“Beacon Heights property”) in Father’s sole name, which was used as the family residence until it was sold in September 1998.

(4)     The Property purchased in 1991 in Mother’s sole name.  It was initially rented out until the Beacon Heights property was sold and Mother and Father moved to live in it.

(5)     House 61 of Fairview Park (“House 61”) purchased in 1991 in Mother’s sole name, which was rented out and sold in 1995.

(6)     A property in Oakland, California purchased in about 1992 in Mother’s sole name, and sold to the defendant in mid-2001 (“California property”).

(7)     A Shop at G/F 32 Boundary Street, Kowloon (“the Shop”) purchased in February 1996 in the name of Fully Profit Ltd (“Fully Profit”).  The Judge held that Mother and Daughter each had 50% interest in the Shop.[3] It was used for Shun Lee Business[4].  In July 2000 it was sold at a loss. 

15.  The Judge found that the deposits for the purchase of the Beacon Heights property, the Property and House 61 came from the funds of Shun Lee Business and the rentals received from some of the properties[5]. 

16.  Between January and June 1996, three mortgages were created over the Beacon Heights property, the Property and the Shop in favour of Dah Sing Bank to secure banking facilities for Shun Lee Trading.  In July 1997, the three properties were re-mortgaged to Hongkong Chinese Bank Limited (“HKC Bank”) to secure an instalment loan of $6.5 million with Father and Daughter as the borrowers, and also credit facilities for the use by Shun Lee Business[6]. 

17.  Since then, HKC Bank had granted various loans and overdraft and other banking facilities to Father and Daughter, and Shun Lee Business[7].  The borrowings were secured initially by the three properties.  Since 1998, additional securities were provided by Mother, Father and Daughter on behalf of Shun Lee Holdings in the form of joint and several guarantees.

18.  The Asian Financial Crisis had a significant impact on Shun Lee Business and the family wealth.  There was pressure from the bank to sell some of the properties so as to reduce the indebtedness owed.  Mother and Father had some heated arguments over whether to sell the Property or the Beacon Heights property, which was the family home.  Eventually the Beacon Heights property was sold in September 1998.  Mother and Father moved to live in the Property while Daughter lived away in a public housing unit. 

19.  The Judge found that in about 1998, Mother requested Daughter to negotiate with HKC Bank for a restructuring of the indebtedness so as to avoid the Property from being repossessed[8].  The Judge further found that a restructuring of the debts did take place in 2000 (“2000 Restructuring”) preceded by the sale of the Beacon Heights property in September 1998, followed by the sale of the Shop in July 2000.  The sale proceeds were applied to settle the accounts of Shun Lee Business and to repay part of the outstanding instalment loan[9]. The total indebtedness was consequently reduced to $5.22 million, and the bank had refrained from repossessing the Property.  The reduced indebtedness was structured as an instalment loan secured by a charge over the Property.  Father and Daughter signed the facility letter as borrowers while Mother signed as mortgagor and guarantor.

20.  It is not in dispute that the mortgage repayments made from 1996 to April 2000 were from the funds of Shun Lee Business[10]. From 1 August 2000, Daughter took up payment of the mortgage repayments.  This continued up to the time of the trial.  The monthly repayment was initially $49,000, which was reduced to $35,000 in 2002 and further to $15,000 in 2003, and revised upward to $18,000 in 2008.  It is the Judge’s finding that Daughter was the source of the money for the mortgage repayments since August 2000[11].  

21.  At the time of Mother’s death in 2012, the Property remained mortgaged to the bank. 

22.  By her will, Mother devised the Property and House 61 to her three sons, including the defendant, and the California property to Daughter.  As mentioned above, House 61 and the California property were no longer owned by Mother at her death.  The Property was the most significant asset in her estate as well as in the family. 

23.  Daughter only came to know of the existence of Mother’s will when she tried to apply for letters of administration of Mother’s estate.  

C.      HCA 77 of 2014

24.  In early 2014, Daughter and Father commenced HCA 77 of 2014 against Mother’s estate claiming that they were beneficially interested in the Property. 

25.  The Judge summarized the parties’ case as follows[12]:

(1)     Father claimed that it was the common intention of him and Mother that the Property was to be held for investment purpose, and that the Property was jointly owned by him and Mother in equal shares until such time when Daughter assumed liability for the mortgage repayments, jointly with him or alone.

(2)     Daughter claimed to have a beneficial interest in the Property on three bases: (a) A general promise made by Mother and Father that if she left her job to assist in Shun Lee Business, they would let her have the business and three properties, including the Property.  She acted upon the promise, left her job to work in Shun Lee Business, assumed the liability to repay the mortgage of the Property and maintained Mother and Father; (b) An agreement with Mother and/or Father that conferred on her a proprietary interest in the Property, which was based on Mother’s request that (i) she handled Shun Lee business, (ii) repaid the mortgage and (iii) maintained Mother and Father (“the three Conditions”) together with the express understanding that Mother would leave the Property to her subject to allowing Father to live in the Property; and (c) After the 2000 Restructuring, a common intention constructive trust was created whereby she assumed the liability for the mortgage repayments in return for Mother’s agreement to leave her interest in the Property to her.

(3)     The defendant’s case is that the Property was intended by Mother and Father to be solely owned by Mother, and that Mother had repeatedly assured him that he and his two brothers were to inherit her assets in return for the unremunerated work they did for her business.  The defendant claimed that the bank loans were for the personal use of Father and Daughter and that the money for the mortgage repayments came from the loans borrowed on the security of the Property.  It is also his case that Daughter provided for Mother and Father and made the mortgage repayments out of her filial duties, and not because of any promise or agreement to give her the Property.

26.  The issues for determination at the trial were[13]:

(1)     In respect of Father’s claim, whether it was the common intention of Mother and Father that the property was for their joint benefit.

(2)     In respect of Daughter’s claim,

     (2.1)  Whether Mother had promised or agreed to give the Property to Daughter;

     (2.2)  What was the source of the money for the mortgage repayments;

     (2.3)  Whether Daughter repaid the mortgage out of filial duty; and

     (2.4)  What relief should be granted to Daughter.

D.     The Judges’ decision

27.  Both Daughter and the defendant gave evidence at the trial.  The Judge considered little weight could be put on the defendant’s evidence while she also did not find Daughter’s evidence to be entirely reliable[14].

28.  On Father’s claim, the Judge was not satisfied that it was the common intention of Mother and Father that the Property was to be jointly owned by them and dismissed the claim. 

29.  In coming to this conclusion, the Judge had regard to the fact that (i) six out of the seven properties purchased were registered in the sole name of either Mother and Father even though the funds were from Shun Lee business; (ii) the defendant chose the Property and signed the provisional sale and purchase agreement; (iii) Mother made her will shortly after the purchase of the Property, an indication that she regarded herself as the sole owner and could freely dispose of the Property under her will; (iv) when the bank pressed for the sale of the properties to reduce the indebtedness, Mother insisted that the Beacon Heights property should be sold instead of the Property which was her property, and no one had responded to her assertion of ownership.  In the end Father gave in and sold the Beacons Heights property.  All these show that Mother and Father regarded the Property as Mother’s property; and (v) on Daughter’s case, Mother had given $1.02 million of the sale proceeds of House 61 to the defendant instead of sharing it with Father or applying it towards the purchase of the Shop, which is indicative of Mother treating House 61 as her own.   

30.  On Daughter’s claim, the Judge rejected her case that Mother had made a general promise to give her the Property as being inherently incredible.  The Judge also held that the pleading and the evidence did not support Daughter’s case that Mother had agreed to leave the Property to her (subject to allowing Father to live in it) upon the performance of the three Conditions by her (see [25(2)] above). 

31.  With regard to Daughter’s case on common intention constructive trust, the Judge found that although the restructuring of the indebtedness took place in 2000, it was traceable to the $6.5 million instalment loan granted in 1997 to Father and Daughter, and that this loan was used in Shun Lee Business.  The Judge was of the view that the fact that Daughter was one of the borrowers could not be an indication that she had beneficial interest in any of the properties, and that she failed to explain the basis for her personal liability for the instalment loan given it was for the use of Shun Lee Business.  The Judge held that Daughter failed to prove any promise by Mother to give her the Property, or inducement to or reliance by her to make the mortgage repayment, and the claims in constructive trust and proprietary estoppel therefore failed.   

32.  On the issue of the source of the money for the mortgage repayments[15], the Judge held that it was indisputable that Daughter had borne the mortgage repayments.  It was pointed out that the income generated by Shun Lee Business was insufficient to pay the mortgage repayments, and neither Mother or Father had financed or was in a position to finance the mortgage repayments.  The Judge accepted that Daughter was the only income generator, took the leading role in running Shun Lee Business and deployed whatever money that came into her hands for the maintenance of her parents and struggled to keep up with the mortgage repayments.  Having regard to the documentary evidence, the Judge concluded that Daughter was the source for the mortgage repayments.

33.  With regard to the issue of whether Daughter made the mortgage repayments out of filial duties, the Judge did not accept the defendant’s contention for three reasons[16].  First, Daughter is legally entitled to recover from Mother’s estate the mortgage repayments she made because under Mother’s will, her three sons shall take the Property subject to incumbrances.  Second, while maintaining the parents may be viewed as performing Daughter’s filial duties, making mortgage repayments may not be so regarded.  Third, the case of Fung Oi Ha v Fung Pui On, HCA 17/2012, 6 June 2016 relied on by the defendant is distinguishable on the facts, including, among others, the fact that the 2000 Restructuring was at Mother’s express request and the mortgage repayments were made to assist Mother to preserve her property and not in discharge of filial duties, bearing also in mind that there was alternative accommodation for the family at the public housing unit where Daughter resided. 

34.  The Judge, however, accepted that Daughter, being one of the borrowers, has a legal obligation to make the mortgage repayments and it is in her interest to protect her credit-worthiness[17]. The Judge concluded that Daughter made the mortgage repayments not out of filial duties, but partly out of her legal obligation and partly to assist Mother[18]. 

35.  As to the final issue of the relief to be granted to Daughter, the Judge held that Daughter should be reimbursed by Mother’s estate for ¾ of the mortgage repayments she made between 1 August 2000 and 1 March 2018 in the sum of $3,199,570.55 and ¾ of mortgage repayments she made on and after 2 March 2018 until Mother’s estate took over the repayment.

36.  The Judge’s reasoning and calculations appear at [144] to [154] of the judgment as follows:

“144. The Daughter’s repayment of the mortgage (not just the capital but also interest) saved the [Property] from re-possession, housed the Mother and spared her from her repayment obligation. It would be wholly inequitable and an unjust enrichment for the Estate to take the [Property] without the burden of repaying the Daughter.

145. Mr Gary Lam submits that there was no pleaded basis for the Daughter to recover the mortgage repayments since the date of death of the Mother. With respect, this was covered by prayer no. 6 of the [Amended Statement of Claim].

146. Mr Gary Lam submits that the limitation period had expired. With respect, limitation was not pleaded as a defence and thus should not be considered: Hong Kong Civil Procedure 2018, Vol 1, §18/8/21.

147. I do not think the notion of resulting trust in Lui Kam Lau v Leung Ming Fai (paragraph 45 above) assists the Daughter. The evidence was insufficient to support her case that she should have beneficial interest. In any case, there was only the bare assertion of the Daughter as to the value of the [Property], which I decline to accept. I am unable to turn her repayments into a percentage of the beneficial interest in the [Property].

148. I instead pay regard to the true nature of the outstanding indebtedness. The 1997 and 1998 facility letters showed the total indebtedness to be over $16 million. Sale of Beacon Heights and the Shop reduced the amount to $5.22 million. The Father had fully borne his share of the indebtedness (even assuming it was 50%), because Beacon Heights was not a negative asset. The Daughter had 4% in Holdings, and Holdings’ liability was cleared as part of the indebtedness of the Shun Lee Business.

149. The remaining indebtedness would have related to the Shop and the [Property]. In paragraph 93 above, I have stated that the Daughter should be held to her admission that she owned 50% of the Shop. Accordingly, the remaining indebtedness should be split between the Mother and the Daughter in the ratio of 3:1.

150. In his closing submission, Mr Enzo Chow only seeks reimbursement for the period on and after 1 August 2000. The total mortgage repayments up to 30 March 2014 were $3,405,288.9 and from 1 April 2014 to 1 March 2018 were $860,805.16.

151. The Will devised the [Property] subject to existing mortgages. However, as mortgagor, the Mother could have recovered the loan (pro rata) from the Daughter. Applying the ratio of 3:1, the Mother’s estate should reimburse the Daughter for $3,199,570.55.

152. In addition, the Mother’s estate should reimburse the Daughter to the extent of 3/4 until the executor takes over the mortgage.

153. I accept counsel’s joint suggestion that pre-judgment interest should be half of P+1% per annum to reflect the fact that the lump sum was accumulated over a period. Thereafter judgment rate shall apply.

154. All mortgage repayments by the Daughter on behalf of the Estate on and after the date of this judgment shall attract judgment rate as well.”

37.  The Judge further ordered that the judgment sums shall stand charged on the Property until full payment is made by Mother’s estate. She also ordered Father’s estate to pay 20% of the costs of Mother’s estate of the action, and Mother’s estate to pay 80% of Daughter’s costs of the action. 

E.     Grounds of appeal

38.  The defendant’s appeal is directed at the Judge’s orders that Daughter be reimbursed by Mother’s estate for the mortgage repayments and that the judgment sums stand charged on the Property.     

39.  The five grounds of appeal set out in the Amended Notice of Appeal and the submissions of Mr Pang SC, who together with Mr Chen appeared for the defendant, can be summarised as follows (respectively “Ground (1)” to “Ground (5)”):

(1)     The Judge was wrong to consider unjust enrichment as a ground for Daughter to recover the mortgage repayments from Mother’s estate in that this was not pleaded and the defence was not able to make proper preparation to meet it.

(2)     The findings and the facts of the case do not support any recognized category of unjust enrichment and there is no unjust factor involved.

(3)     The apportionment of liability for the indebtedness/mortgage repayments between Mother and Daughter in the ratio of 3:1 is arbitrary, illogical and flawed.

(4)     The Judge’s finding that it would be wholly inequitable for Mother’s estate to take the Property without reimbursing Daughter is irrelevant in the absence of constructive trust and proprietary estoppel, and contrary to the Judge’s other findings.

(5)     The order that the judgment sum stands charged on the Property is in effect an order of execution of judgment by way of a charging order absolute.  It should not have been made without any application from Daughter or first inviting submission from the parties.

F.     Reasons for the decision on the appeal

F1.    Ground (1): pleading point

40.  Ground (1) is a pleading point.  It is said that while the Judge ordered reimbursement of the mortgage repayments on the basis that it would be wholly inequitable and an unjust enrichment for Mother’s estate to take the Property without repaying Daughter, unjust enrichment was never pleaded as a cause of action in the Amended Statement of Claim (“ASOC”).    

41.  The defendant’s arguments are threefold.  First, it is said that Daughter only pleaded proprietary estoppel, common intention constructive trust and implied constructive trust, and thus when these claims failed there would be no basis for ordering equitable compensation.  Second, the ASOC has not pleaded the “unjust” factor required for a plea of unjust enrichment.  The Judge’s holding at [144] of the judgment that it would be an unjust enrichment for Mother’s estate to take the Property without the burden of repaying Daughter was not raised in the pleadings.  Third, it is said that the lack of pleadings has resulted in substantial injustice because the defendant has no opportunity to plead or argue the following matters which would show the “unjust” factor did not exist:

(1)     After the 2000 Restructuring, the mortgage over the Property was to secure the $5.22 million instalment loan of which Father and Daughter were the borrowers and under a primary obligation to make repayment whereas Mother’s liability as a guarantor and mortgagor was only secondary.  Further, the $5.22 million loan had its origin in the $6.5 million instalment loan borrowed in 1997, of which Daughter and Father were the borrowers.  There was thus nothing unjust for Daughter to fulfil her primary obligation of repayment. 

(2)     The $6.5 million loan was used for Shun Lee Business and the purchase of the Shop, with all repayments up to April 2000 being paid from the funds of Shun Lee Business.

(3)     Daughter had received benefits from Shun Lee Business, including a monthly salary of $72,000 and she was given 50% interest in the Shop. 

(4)     Father, as a co-borrower, was under a liability to contribute to the mortgage repayments, a matter that had not been taken into account.

42.  Mr Li, who together with Ms Chung appeared for Daughter argued there is no rule or form prescribing how the claim founded on unjust enrichment should be pleaded, and that the relevant consideration is whether the facts necessary for the claim have been pleaded.  He referred to Goff & Jones, The Law of Unjust Enrichment, 9th ed at [1-37] which stated:

“When pleading claims in unjust enrichment, all that is required for a claimant to state the nature of the claim and the facts on which he relies, and that can be done without mentioning the old forms of action.”

43.  It is Mr Li’s submission that the necessary material facts have been pleaded in [32] and [35] of the ASOC, and a claim for reimbursement has been set out in paragraph 6 of the Prayer.  He argued it is clear that Daughter’s case is that Mother’s enrichment was at her expense as she had spent money to save the Property from being repossessed or sold by the bank.  He further argued that the defendant was well aware at the trial that the issue of unjust enrichment was engaged and there had been discussions and arguments on the point at the trial.

44.  It is common ground that a claim of unjust enrichment involves four questions, namely, (a) was the defendant enriched; (b) was the enrichment at the plaintiff’s expense; (c) was the enrichment unjust; and (d) is any of the defences applicable: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at [67] and [68].

45.  The ASOC pleaded in [32] and [35] that:

“32. The Deceased and/or the 2^nd Plaintiff have had the use and benefit of the [Property] and the outgoings therefor, and/or their living expenses paid whilst living there, by the 1^st Plaintiff.

I. In the premises, pursuant to the Agreements made between the Deceased, the 1^st and 2^nd Plaintiffs set out in Paragraphs 16, 17, 18, 19 and 20 hereof, and as the 1^st Plaintiff has made the instalment and other payments for them, and performed her part of her Agreement, she is entitled to the [Property] as a proprietary estoppel has been created and is entitled to have an order that the Deceased’s share in the [Property] be transferred to her absolutely.

II. Further or alternatively, as there was a common intention constructive trust created as set out in Paragraphs 16, 17, 18, 19 and 20 hereof, (as varied) and as the 1^st Plaintiff continued to make the instalment, interest and other payments for the Deceased and the 2^nd Plaintiff and assumed the liability of the Deceased for the said loan(s).

III.     Further or alternatively (which is not primarily contended for) by reason of the matter pleaded in Paragraphs 16, 17, 18, 19 and 20 hereof, an implied constructive trust was created to hold the [Property] for the use and benefit of the 1^st Plaintiff.”

“35. Further or alternatively (which is not primarily contended for) the 1^st Plaintiff is entitled to claim the instalment and interest payments made to save the [Property] from being possessed and/or sold by the Bank and/or Citic Ka Wah Bank Ltd and/or additional sums expended to maintain the [Property], the outgoings and household expenses of to maintain the living of the Deceased and/or the 2^nd Plaintiff.”

46.  Paragraphs 6 and 7 of the Prayer claimed:

“6. A declaration that the Defendant as such Executor do reimburse the 1st Plaintiff the sums she has expended set out [sic] Paragraphs 32 and 35 to save the [Property] being sold and/or repossessed by the Bank and/or Citic Ka Wah Bank Ltd; and/or

7. Further, in any event, a Declaration that the Defendant as executor of the estate of Deceased is liable to pay equitable compensation to the 1^st Plaintiff;” 

47.  Further and better particulars of the payments, outgoings and expenditure pleaded in [32] and [35] of the ASOC had been provided upon the defendant’s requests[19]. 

48.  Counsel are in agreement that a plaintiff cannot plead a general plea of unjust enrichment.  As held in Charles Uren v First National Home Finance Limited [2005] EWHC 2529 at [16] and [18], he has to plead facts that are capable of bringing the case within one of the established restitutionary claims or some justifiable extension of them.  But if the facts were sufficient it would not matter that there is no pleading of some particular category of restitutionary claim.

49.  As accepted by Mr Li, the drafting of the ASOC (for which he is not responsible) is far from being satisfactory.  I, however, agree with him that on a fair reading of it, the necessary facts to support a claim of unjust enrichment have been pleaded.  The ASOC has pleaded[20] that since 1997 the Property, initially purchased with a mortgage, was used (together with the Beacon Heights property and the Shop) to secure banking facilities for the use of Shun Lee Business; it was saved from being sold or repossessed by the bank by the 2000 Restructuring that involved the sale of the other two properties to reduce the indebtedness to $5.22 million secured by a mortgage over the Property; Daughter negotiated the 2000 Restructuring at the request of Mother, who had no income and could not maintain herself; after the restructuring Mother was released from being a borrower of the bank loan; and she had the use and benefit of the Property.  These would support the element of “enrichment”.         

50.  The ASOC has also pleaded[21] that Daughter, as requested by her parents, left her job to help out with Shun Lee Business; after the 2000 Restructuring Daughter took over the liabilities of the bank loan and with her own efforts paid the mortgage repayments when neither of her parents could produce income; and she also paid the expenses of and maintained her parents.  These would support the element that the enrichment was at Daughter’s expense.

51.  It is also pleaded[22] that since the sale of the Beacon Heights property, Mother and Father moved to live in the Property while Daughter lived separately in a public housing unit; and Mother’s sons, including the defendant, did not maintain the living of Mother or provide financial aids to her when the bank pressed for the sale of properties to reduce the indebtedness or in any way contribute to the mortgage repayments of the Property.  These are averments capable of supporting the element that the enrichment was unjust. 

52.  Further, although unjust enrichment is not expressly referred to in the pleading, having regard to the parties’ written opening and closing submissions as well as the exchanges between counsel and the Judge at the trial, it cannot be said that the defendant was taken by surprise or that there was no opportunity for the defendant to meet the claim. 

53.  To begin with, the defendant’s trial counsel observed in his written opening submission[23] that it appeared from the plaintiffs’ opening submission that they “no longer pursue” the claims for “reimbursement and equitable compensation”.  Evidently, counsel recognised that the relief claimed by Daughter included claims for reimbursement and equitable compensation.  When asked by the Judge to clarify on this[24], plaintiffs’ trial counsel indicated that Daughter’s alternative case (“next best case/scenario”) would be that she was entitled to be reimbursed by Mother’s estate for her financial contributions to Mother and the mortgage repayments of the Property that she had paid over the years[25].  The Judge then specifically directed counsel to consider what might be the appropriate relief if she did not accept Daughter’s claim on trust or proprietary estoppel, pointing out that under Mother’s will the Property was demised to the sons subject to encumbrances[26].  Defendant’s counsel replied that he would try to establish from the evidence that the bank loan was really Daughter’s personal loan such that it was her obligation to repay[27]. Counsel were asked by the Judge to deal with this point and other issues relating to relief in their closing submissions and to provide draft orders setting out all the options[28].  It is clear from the above exchanges that all parties were aware at the very early stage of the trial that a restitutionary claim was engaged and that Daughter was pursuing a separate claim for reimbursement of mortgage repayments that was not based or dependent on trust and/or proprietary estoppel.        

54.  In his written closing submission[29], Daughter’s counsel set out a table of the financial contributions made by Daughter for Mother’s benefit, which included mortgage repayments made since 1 August 2000, pointing out that Mother’s sons had not contributed to the purchase or preservation of the Property from being repossessed by the bank.  The defendant’s written closing submission also dealt substantially with the proper relief to be made should the court reject Daughter’s case and found there was no proprietary estoppel and/or constructive trust[30].  It acknowledged that under Mother’s will, the Property was demised to the sons “subject to the existing mortgages thereof (if any)” and that Daughter had made mortgage repayments to the bank, but argued that Daughter’s claim for reimbursement of the mortgage repayments should be dismissed because she had not pleaded the basis for it[31].

55.  As requested by the Judge, both counsel had provided draft orders setting out what they contended should be ordered by the court depending on the findings on the plaintiffs’ claims.  Notably, in the plaintiffs’ draft order, section (F) covered the scenario where both Father’s claim on trust and Daughter’s claim on proprietary estoppel failed, but Daughter was entitled to reimbursement since 1 August 2000.  An order for reimbursement was also contained in section (C) dealing with the scenario where Father’s trust claim succeeded but Daughter’s proprietary estoppel claim failed.  In both scenarios, Daughter’s claim was put as a reimbursement and not on the basis of an equitable compensation. 

56.  On the other hand, the defendant’s draft order, while asked primarily (under paragraphs A1 and C3) for a dismissal of the plaintiffs’ claims if Daughter’s proprietary estoppel claim was rejected, proposed in the alternative (under paragraphs B2 and C4) for an order that Mother’s estate shall pay to Daughter the mortgage repayments if her proprietary estoppel claim failed. This again demonstrates that counsel was well aware that a separate claim to reimburse Daughter for her mortgage repayments not based on her proprietary claims was engaged.

57.  In fact, counsel had also developed oral submissions on the relief and this aspect of Daughter’s claim.  In particular, the defendant’s counsel acknowledged that Daughter might have a cause of action in unjust enrichment even if the Judge was to find that the Property was wholly owned by Mother, but he sought to argue that there was no element of “unjust” because if Daughter’s evidence about Mother’s promise to give her the Property was rejected then it could be said that she made the mortgage repayments just to bolster her case[32].  In his reply submission[33], the defendant’s counsel also accepted that paragraph 6 of the Prayer is a claim for reimbursement, separate from the claim for equitable compensation in paragraph 7 of the Prayer, and that it is “presumably based on unjust enrichment”.       

58.  Additionally, during exchanges between the Judge and the defendant’s counsel, there had been reference to mistake giving rise to unjust enrichment, i.e., Daughter made the mortgage repayments in the mistaken belief that Mother had promised to give her the Property[34].  It is true that the Judge did not make a specific finding of mistake; she had, however, pointed out[35] that Daughter could have allowed the Property to be sold, housed her parents in the public housing unit that she resided in and maintained them frugally.  There is sufficient basis in the case to support a case of unjust enrichment based on mistake.

59.  Taking an overall view of the case, despite the unsatisfactory pleading and that unjust enrichment was not expressly pleaded, the Judge had right at the beginning drawn the parties’ attention to a claim of reimbursement on unjust enrichment ground, and the defendant was aware of the issues involved.  It is also evident from the transcript that defendant’s counsel had endeavoured to address the claim and the issues involved in his closing submission.  Although he had complained there was no proper pleading of unjust enrichment, he had not sought an adjournment or leave to amend the defence (such as to raise a defence of limitation).    

60.  I also do not accept the argument that the defendant had not been able to plead and argue matters to show there was no unjust factor (see [41] above).  In respect of the purpose of the $5.22 million instalment loan, the defendant had sought to argue that the bank loan was for the personal use of Father and Daughter, but the Judge did not accept this was the case[36].  Contrary to Mr Pang’s submission that there was no opportunity to explore where did the funds for Bo Bo Deco come from, the defendant had brought this up in his evidence and suggested that the goods and cash for the operation of Bo Bo Deco came from Shun Lee Business[37].  The Judge had in the judgment[38] specifically rejected there was any connection between the mortgage loan and Bo Bo Deco.  The Judge, however, accepted that the restructured loan had its origin in the $6.5 million instalment loan obtained in 1997 for the use of Shun Lee Business and to finance the purchase of the Shop[39].  When considering Daughter’s case, the Judge also took account of the submission that she received a number of benefits when she joined Shun Lee Business which was then in a prosperous state, including a monthly salary of $72,000 and 50% interest in the Shop[40]. 

61.  As to the fact that Daughter was one of the borrowers of the $5.22 million instalment loan and had a legal obligation to make repayment, the Judge was conscious of it and had given consideration to it[41]. Mr Pang stressed that Daughter and Father, being the borrowers, were under a primary obligation to make repayment whereas Mother, being the mortgagor and/or guarantor only had a secondary obligation, thus it was in Daughter’s interest to pay the mortgage repayments and there was nothing unjust about it.  With respect, in the context of this case, the distinction between primary obligor and secondary obligor has no real significance.  The liabilities of Daughter and Father as borrowers and Mother as mortgagor and/or guarantor were in truth co-extensive.  In as much as Daughter had benefitted from Shun Lee Business which had the use of the bank loans and facilities, Mother also benefitted from the business.  On the evidence and the facts as found by the Judge, it was more the Mother’s wish and in her interest to keep up with the mortgage repayments so as to avoid the Property from being repossessed by the bank.  In short, I do not accept the argument that because Daughter was under a legal obligation to repay the bank loan there was no unjust factor in the case.

62.  For the above reasons, Ground (1) has no merits and should be rejected.

F2.   Ground (2): No basis to support unjust enrichment

63.  The thrust of the defendant’s arguments under Ground (2) is that on the facts of the case, it does not fall within any of the recognised categories of unjust enrichment.  It is said that neither Daughter nor the Judge had attempted to categorise Daughter’s reimbursement into a recognized ground of recovery in restitution.  It is also argued that the unjust factor is not made out. 

64.  Counsel have no disagreement on this aspect of the relevant law.  It is that a claimant must be able to point to a ground of recovery that is established by past authority, or one which is justifiable by a process of principled analogical reasoning from past authority, and that the categories of unjust enrichment are not closed: Goff & Jones, supra, at [1-26] and [1-27].

65.  As discussed in [58] above, on the facts of this case, the recovery could have been on the basis of mistaken payment in that Daughter made the mortgage repayments in the mistaken belief that she would obtain an interest in the Property.  Although the Judge did not make a specific finding of mistake, she had canvassed this aspect with defendant’s submission at the trial.[42]

66.  Mr Li also submitted that the facts also support a claim for restitution on the basis that Daughter had discharged the debt that Mother was liable to pay, or by way of Daughter’s subrogation to the position of the bank, relying on Goff & Jones, supra, at [20-01] to [20-03]; Kingsway Finance Ltd v Wang Qingyi & Anor [2015] 1 HKC 302 at [13] to [16] and Netwell properties Ltd v JCG Finance Co Ltd [2002] 2 HKC 558 at [23] to [25] & [34]. 

67.  In law, a claim for contribution or reimbursement is made out if the claimant shows that he had discharged the defendant’s liability to a third party and that (i) the claimant and the defendant were both liable to the third party, (ii) who was forbidden to accumulate full recoveries from both of them, but (iii) who could choose to recover in full from either of them, and (iv) some or all of the burden of paying the third party should ultimately be borne by the defendant; Goff & Jones, op cit.  It is also recognised in Netwell properties Ltd v JCG Finance Co Ltd, supra, that subrogation is available as a remedy against a party who would otherwise be unjustly enriched, and that the remedy is flexible and adaptable to produce a just result. 

68.  There is therefore force in Mr Li’s argument that, having discharged the debt payable by Mother, Daughter is entitled to claim against Mother’s estate for the mortgage repayments she had made on the basis of restitution or the equitable remedy of subrogation which is based on the doctrine of unjust enrichment. 

69.  Mr Pang also argued emphatically that no unjust factor could be found in view of the Judge’s rejection of Daughter’s case that Mother had promised her an interest in the Property and also the finding that Daughter made the repayment partly out of her legal obligation to do so.  I do not agree. 

70.  Although the Judge found against Daughter on the issue of whether Mother had promised to give her the Property, this does not remove the unjust factor given the Judge’s acceptance of Daughter’s evidence that she negotiated the 2000 Restructuring to prevent the Property from being repossessed by the bank, and after the total indebtedness owed to the bank was reduced from some $16 million to $5.22 million with the sale of the Beacon Heights property and the Shop, she alone shouldered the repayments from her own resources.  Importantly, she did this not out of her filial duties but at Mother’s specific request to assist her to preserve the Property which she used as her residence.  Likewise, the Judge’s finding that it was partly out of her legal obligation that Daughter made the mortgage repayments has to be viewed against the broader picture as mentioned above and also the Judge’s finding that Daughter could have allowed the bank to repossess and sell the Property, housed the parents in the public housing unit and supported them frugally.      

71.  Ground (2) cannot stand and is to be rejected.

F3.   Ground (3): Apportionment of liability was arbitrary and wrong

72.  Ground (3) is directed at the Judge’s holding that the remaining indebtedness after the 2000 Restructuring should be split between Mother and Daughter in the ratio of 3:1 with the result that Mother’s estate was to reimburse Daughter ¾ of the mortgage repayments made since 1 August 2000. 

73.  The Judge’s reasoning and calculations for this finding were set out in [148] to [152] of the judgment (see [36] above).  In essence, the Judge found that the 1997 and 1998 facility letters showed a total indebtedness of over $16 million, which was reduced to $5.22 million by the proceeds of sale of the Beacon Heights property and the Shop.  The Judge was of the view that with the sale of the Beacon Heights property which produced over $8.3 million, Father had fully borne his share of the indebtedness (even assuming he was 50% liable), and the remaining indebtedness was related to the Shop and the Property.  As Mother owned the whole of the Property and half of the Shop jointly with Daughter, the remaining indebtedness should be borne by Mother and Daughter in the ratio of 3:1.

74.  The defendant criticised the Judge’s finding and calculation as arbitrary and erroneous for the following reasons: 

(1)     There was an unknown amount of indebtedness under the 1997 facility letter which rendered the total indebtedness uncertain. 

(2)     The over $16 million indebtedness was owed by different people/parties and there was no finding or calculation as to how much was owed by each of them.

(3)     The Judge erroneously treated the ownership of the Property and the Shop as representative of the proportion of indebtedness owed by the parties involved.

(4)     There was no evidence that the Beacon Heights property was not a negative asset because the over $16 million indebtedness was secured by legal charges over the Beacon Heights property, the Shop and the Property.     

75.  The defendant also argued that the Judge erred in not distinguishing between the liability of Father and Daughter and that of Mother under the facility letters in that Father and Daughter were named borrowers with primary liability whereas Mother was a mortgagor and guarantor whose liability was secondary.  The Judge is further said to have erred in failing to consider that the sale of the Shop had the effect of reducing Mother’s share of indebtedness.

76.  Mr Li rightly observed that the defendant is mounting a challenge to the Judge’s factual finding.  In order to succeed, the defendant has to show that the Judge palpably erred in making a finding not supported by any evidence, misunderstanding the evidence, failing to take into account relevant evidence or taking irrelevant matters into account or that the finding is plainly wrong: United Muslim Association of Hong Kong v Yusuf Yu [2018] 4 HKLRD 22 at [38] and [39].

77.  With regard to the Judge’s finding that the 1997 and 1998 facility letters showed a total indebtedness of over $16 million, this is borne out by the evidence.  Firstly, under the facility letter dated 30 May 1997, an instalment loan of $6.5 million and credit facilities, with the amount unknown, were granted by the bank to Father and Daughter as borrowers secured by legal charges over the Beacon Heights property, the Shop and the Property.  Daughter’s evidence was that the credit facilities were to enable Shun Lee Holdings to conduct export business.  Secondly, under the facility letter dated 4 June 1998, an instalment loan of $3,600,000 and an overdraft of $6,800,000 were granted respectively to Shun Lee Holdings and Shun Lee Trading as borrowers secured by legal charges over the three properties and a joint and several guarantee by Father, Mother and Daughter on behalf of Shun Lee Holdings.  On Daughter’s evidence, the overdraft was fully utilised.  The indebtedness under the two facility letters therefore came up to over $16 million, as found by the Judge.

78.  It is true that the amount of the credit facilities granted under the 1997 facility letter was unknown, but this is immaterial.  This is because the banking facilities were reviewed annually by the bank, and the facility letter dated 27 July 2000 showed that part of the proceeds of sale of the Shop were applied to the credit facilities granted to Shun Lee Business and the account was settled in full[43].  The credit facilities were therefore extinguished in the 2000 Restructuring.  Its amount would not impact on the Judge’s approach and calculation, which focused on the indebtedness and the liability after the 2000 Restructuring.

79.  Further, while the loans and banking facilities under the 1997 and 1998 facility letters involved different borrowers, the Judge had found that the loans and facilities were used for Shun Lee Business and rejected the defendant’s case that the instalment loans were for the use of Father and Daughter.  It is also Daughter’s evidence, which the Judge accepted, that repayments of the indebtedness under the facility letters came from the funds of Shun Lee Business.  In the circumstances, there is no need to ascertain or resolve how much of the over $16 million indebtedness was owed by each of the parties involved, and the Judge did not err in not undertaking the exercise. 

80.  It is also not necessary to distinguish between the liability of Father and Daughter and that of Mother under the facility letters.  As mentioned above, their liabilities are co-extensive.  Being the mortgagor and one of the guarantors, Mother was under a liability to repay the indebtedness. After all, even though Mother was not one of the named borrowers, the loans and facilities were for the use of Shun Lee Business in which she had an interest.      

81.  As to whether the Beacon Heights property was a negative asset, it is Daughter’s evidence that its mortgage was paid off whereas the Shop was sold at a loss and the proceeds of its sale was insufficient to pay off its mortgage leaving an amount of $1,070,000 outstanding.  It follows that the Judge cannot be faulted for taking the view that with the repayment of over $8.3 million from the sale of the Beacon Heights property, Father had borne his share of the indebtedness.  On the other hand, as the Shop was a negative asset and it was sold at a loss, its sale did not have the effect of reducing Mother’s share of liability for the indebtedness.    

82.  In 2000, after the sale of the Beacon Heights property, the settlement of the indebtedness of Shun Lee Business in full, and the sale of the Shop which left an outstanding balance of $1,070,000, the remaining indebtedness would consist of the mortgage over the Property and the outstanding balance of the mortgage over the Shop.  As the Judge found that Father had borne his share by selling the Beacons Heights property, the remaining indebtedness was to be shared by Mother and Daughter.  In deciding their share of the indebtedness, the Judge took a rough and ready approach by taking Mother’s and Daughter’s interests in the Property and the Shop as a reference point.  Although the Judge’s approach may not be exact, she was doing the best she could to arrive at a just outcome.  It cannot be said that her approach and the apportionment she adopted was arbitrary or erroneous.         

83.  In this regard, it is to be noted that the defendant’s trial counsel had in his written closing submission[44] put forward for the Judge’s consideration what he considered would be a proportionate and just remedy to Daughter having regard to the overall circumstances in the case.  He argued, firstly, that Daughter’s contribution to Mother’s living expenses should not be allowed in any event because it was her filial duty to provide for the parents’ living; and, secondly, since there was no evidence on the value of the Property, Daughter’s contribution could not be translated into a percentage of the interest in the Property and the court could not assess what percentage of the interest in the Property should be awarded to her to achieve a just and equitable outcome.  He therefore submitted that the court “should make an order that Daughter be repaid the sum of loan repayments which she had repaid in reliance upon the Mother’s promise.”  He went on to apportion Daughter’s liability for the indebtedness by dividing the liability of Shun Lee Business into three parts (shared among Father, Mother and Daughter) and the outstanding loan in respect of the Shop into two parts (shared between Mother and Daughter), and further proposed that Daughter’s share of liability be deducted from the amount of mortgage repayments she had made and to be reimbursed. 

84.  While this was not his primary position, the defendant’s counsel had accepted that some form of apportionment would be appropriate if the Judge were to order that Daughter be reimbursed for her mortgage repayments.  Although Mr Pang sought to argue against any form of apportionment, which he contended had no proper evidential basis, he is bound by his predecessor’s stance and submission. 

85.  All in all, it has not been shown that the Judge’s approach and calculation were palpably wrong.  Ground (3) is to be rejected.          

F4.   Ground (4): The Judge’s finding of inequity    

86.  Ground (4) is a complaint against the Judge’s finding in [144] of the judgment that it would be wholly inequitable and an unjust enrichment for Mother’s estate to take the Property without the burden of repaying Daughter.  It is said that the finding of inequity is contrary to:

(1)     The Judge’s finding that it would not be unconscionable for Mother to repudiate any promise she made;

(2)     The loans under the facilities issued by the bank were used for Shun Lee Business;

(3)     Daughter had since 1996 assumed a dominant role in the running of Shun Lee Business, which was then in a prosperous state; and

(4)     Daughter had benefitted from her involvement in Shun Lee Business, including a monthly salary of $72,000 and 4% and 50% share in Shun Lee Holdings and the Shop respectively. There is thus nothing inequitable about Daughter taking up personal responsibility for repayment during the bad times of Shun Lee Business.

87.  The defendant also argued that with Daughter’s pleaded case of constructive trust and proprietary estoppel being rejected, there was no legal basis upon which the Judge could come to the finding of inequity. 

88.  Dealing firstly with the last point, as discussed above, Daughter had pleaded a claim for reimbursement in [35] and paragraph 6 of the prayer in the ASOC.  Although the ASOC did not expressly plead unjust enrichment, the facts pleaded were sufficient to enable it to be considered.  In [144] of the judgment, the Judge was discussing the issue of relief to be granted to Daughter.  The finding of inequity was in the context of, and relevant to, Daughter’s claim for reimbursement under unjust enrichment.  The fact that Daughter’s case on constructive trust and proprietary estoppel failed does not mean that the Judge, when considering granting relief under unjust enrichment, could not have come to the view that it was inequitable (in the sense of being unjust) for Mother’s estate to take the Property without reimbursing Daughter for the mortgage repayments she had made.

89.  There are also no merits in the argument that the finding of inequity is contrary to the Judge’s other findings.  The inconsistencies argued by the defendant are not readily understood.  The fact that it is not unconscionable for Mother to renege on her promise to give the Property to Daughter does not mean that it will not be unjust for her estate to take the Property without reimbursing Daughter for the mortgage repayments when the evidence showed, and the Judge had found, that Daughter’s payments had preserved the Property to the benefit of Mother.  The finding of inequity is also not inconsistent with the fact that Daughter was running Shun Lee Business and the borrowings from the bank were used in Shun Lee Business, bearing in mind that the repayments to the bank before the 2000 Restructuring came from the funds of Shun Lee Business.  Further as discussed above, the fact that Daughter had received benefits from Shun Lee Business does not mean there is no injustice in not compensating or reimbursing her for the mortgage repayments she alone made to preserve the Property where Mother was housed as she had wished.  Over the years, in as much as it is said that Daughter had benefitted from her involvement in Shun Lee Business, Mother had also benefitted from Shun Lee Business considering, among other things, the funds of the business had been deployed to finance the purchase and mortgage repayments of her properties as well as her maintenance.

90.  For the above reasons, Ground (4) has no merits and is to be rejected.

F5.   Ground (5): Order charging the judgment on the Property

91.  Ground (5) relates to the Judge’s order that the judgment sums awarded to Daughter stand charged on the Property, subject to prior incumbrances, until full payment by Mother’s estate.  The defendant complained that the order, which is in effect an order of execution of judgment by way of a charging order absolute, was made in the absence of application and without hearing the parties.  It is pointed out that under section 20 of the High Court Ordinance, Cap. 4, which empowers the Court to impose a charging order on the property of a judgment debtor for securing the payment of a judgment debt, the Court shall consider all the circumstances of the case and, in particular, any evidence before it as to (i) the personal circumstances of the debtor, and (ii) any prejudice to other creditors.  At the same time, the procedure for a judgment creditor to apply for a charging order provided for in Order 50 rule 1 of the Rules of the High Court, Cap. 4A, will also allow interested parties who may be adversely affected by the charging order an opportunity to be heard.  The defendant therefore said that the way the Judge imposed the order has deprived him of his right to be heard.

92.  Mr Li, on the other hand, argued that this was a mere procedural point.  He also submitted that the Judge did not have to resort to Order 50 rule 1 as she could make the order under paragraph 8 of the prayer which claimed “further or other relief”, and also because Daughter has subrogated into the position of the bank.  It is further argued that the Judge has correctly exercised her discretion because, other than the Property, there is no other security for repayment of the judgment sums.     

93.  There can be no dispute that the Court has power under section 20 of the High Court Ordinance to impose a charging order for securing the payment of a judgment debt.  The defendant’s complaint is directed at the way the order was imposed.  It is not in dispute that the Judge had not invited submissions from counsel on the making of a charging order on the sums that Mother’s estate would be ordered to pay to Daughter.  I accept that the parties should be heard if the Judge was minded to make the order, which was not a relief sought by Daughter at the trial.  While a charging order may arguably fall within “further or other relief”, the fact remains that at the trial Daughter never asked for the order and the defendant therefore had no opportunity to argue on it.     

94.  The Judge had not explained her reasons for imposing the order on her own initiative.  Mr Li referred to the fact that the defendant is a US resident.  However, this is not material since the judgment sums were ordered against Mother’s estate and the defendant is only the executor.  It is accepted that the Property was the most and only valuable asset of Mother’s estate, but time would be needed to vest the Property in the beneficiaries.  In addition, the Property is charged to the bank, and the writ of the action had been registered against the Property.  There was no real urgency or necessity to impose a charging order on the Property on the court’s own motion.

95.  On the other hand, I note it is not contended that the Judge had no jurisdiction to make the order in question.  Importantly, the defendant has not pointed to any actual or substantive prejudice.  Nor has he identified any substantial grounds that he would have advanced to oppose the making of the order had he been given an opportunity to be heard.  In addition, we were informed by Mr Li that the bank had issued proceedings against both the plaintiffs and the defendant to recover possession of the Property.  We are unable to tell whether this is due to default in making repayments as we have not been shown the originating document, and according to Mr Pang the defendant had been paying the mortgage repayments since July 2018.  In these circumstances, I do not think this Court should interfere with the order imposed by the Judge.

G.     Disposition and costs

96.  For the reasons stated above, I would dismiss the defendant’s appeal. 

97.  Counsel agree that costs of the appeal should follow event and there should be certificate for two counsel.  Accordingly, I would order that the defendant pays the 1^st plaintiff her costs of this appeal, including the costs of the amendment of the Notice of Appeal[45], to be taxed if not agreed together with a certificate for two counsel.

Hon Au JA:

98.  I agree with the judgment of Chu JA.